Ethiopian-born Noah Samara is founder and CEO of WorldSpace, an international satellite radio service that is partly owned by XM.

A founding father of satellite radio tells DailyTech that the XM-Sirius merger would create more choice -- not less.

Noah Samara, CEO of WorldSpace, says that for satellite
radio to thrive, the FCC must approve the merger
of the only two satellite radio broadcasters serving North America.

Samara was involved in satellite radio from its inception. He was instrumental
in developing and licensing key technologies for the launch of XM in the early
'90s before turning his attention to creating satellite radio services for
Africa, Asia and Western Europe. In an exclusive interview with DailyTech, Samara called on regulators
to support the merger and look for alternative ways to ensure that consumer
interests are protected.

"There are other ways of ensuring that the consumer is
not price-gouged," Samara said."The FCC could find those ways and
ultimately benefit the public interest."

The biggest benefits will come in the form of new and
innovative programming, made possible by the economic efficiencies XM and
Sirius will realize as a merged company, Samara said. In the current situation,
both companies are hemorrhaging money because of the exorbitant sums each must
pay for premium content, he said. "In a duopoly, each player is doing
everything it can to undermine the other."

Sirius' and XM are "not profitable because, though the
product is good, bringing it to the consumer has been very expensive,"
Samara said. He cited examples such as XM's $650 million, 11-year contract to broadcast Major League Baseball and Sirius's 5-year,
$500 million-plus package to lure Howard Stern away from FM radio, making him
perhaps the best paid "talking head" in the world. "This
one-upmanship has driven up the price of the content and therefore the
ultimate breakeven point for the business," Samara said.

By ending the content bidding war between the two companies
and allowing them to reduce costs by eliminating redundancies in their operations,
the merger could usher in a "new golden age of radio -- except this time
on steroids," Samara said.

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First of all, you have to remember that both companies are hemorrhaging cash badly. If SOMETHING isn't done, one will go out of business and there will be a monopoly on satellite radio regardless.

Second of all, monopolies can and do benefit consumers. Would two separate, disconnected subway systems in NYC be cheaper and more convenient than one? The situation is even more complex in the case of satellite radio, as companies not only compete with each other, but other forms of in-car entertainment, such as terrestial radio, prerecorded content, etc. A monopoly provider couldn't raise prices with impunity...people would simply tune them out and listen to other options.

Oops, the "natural monopoly" term is applied to any industry where entry costs or economies of scale are such so that one only firm is able to profitably survive.

In fact, this is the reason why utilities and transport systems are judged natural monopolies. Two subways systems couldn't survive in NYC...the costs of two separate sets of tunnels and tracks would be far too high.

> "Markets self-regulate much better than any gov't bureaucrat"

They sure do...and the market in this case wants to merge. Regulation is preventing them from doing so.

> "Monopolies CAN benefit consumers, but only if they are regulated..."

I have to disagree here. In nearly all cases, a natural monopoly (i.e. one not mandated by government fiat) benefits the consumer...with or without government intervention. I can point out numerous examples of such, going all the way back to Standard Oil. When it was broken up, oil prices (which had been been steadily declining for decades) immediately rose, and stayed artificially high for many years. Or the case of aluminum, where Alcoa was carved up via antitrust legislation, and the less efficient firms caused prices to rise as well.

Finding a case where a non-government mandated monopoly breakup actually benefitted the consumer is considerably more difficult. But I'm willing to hear any examples you might raise.

quote: First of all, you have to remember that both companies are hemorrhaging cash badly. If SOMETHING isn't done, one will go out of business and there will be a monopoly on satellite radio regardless.

I agree that before very long there will be only one exactly as you have stated for the reason you stated (I actually agree with you most of the time masher2).

However it's more likely we'll have none whatsoever, IMO, because the damage already done will likely do away with the survivor as well. About the only way that one will stay long term would be if the "last" one can cancel/renegotiate its contracts when under bankruptcy proceedings while simultaneously still being able to get financing for its continuing losses. They've still got to compete with a hundred million iPods and free broadcast radio. :-)

P.S. - I always find it amusing to see the comments (not by masher2) about how companies are always doing horrible things so they can increase profits (for their wealthy owners) -- when in reality the companies (such as these) are losing money hand over fist trying to prevent their death. Possibly losing retirement savings money that an aggressive fund in our 401K has invested. :-)